GSP+ withdrawal challenge:
Central Bank outlines policy measures:
Lanka ready to mitigate losses
The Central Bank of Sri Lanka (CBSL) clarifying its position with
regard to the loss of GSP+ scheme and its impact on Sri Lanka and the
garment industry said it has taken, several policy measurers to mitigate
the losses.
Current reports indicate that the Generalized System of Preferences
plus (GSP+) facility granted by the European Union (EU) would not be
available for Sri Lanka after August 15.
Based on such reports, there has been considerable speculation.
As presently constituted, the GSP+ scheme provides certain duty
concessions to imports from a few selected developing countries to
buyers in the EU. Such concessions are entirely non-reciprocal.
Therefore, a significant risk of withdrawal of such concessions by
the EU authorities at any point of time, is carried by the recipient
country exporters, the CBSL said in a statement.
While the prevailing crisis in some of the economies in the EU region
has added to the difficulty of continuation of such concessions by the
EU, the CBSL has regularly cautioned all stakeholders about the inherent
uncertainties surrounding the continuation of the GSP+ facility, and
advised all to prepare for the inevitability of the discontinuation of
the scheme.
As a consequence, this issue has been discussed widely over the past
two years, and the government, CBSL as well as many Sri Lankan exporters
to the EU have already taken many measures to deal with this risk.
Some of these measures are: improving the Sri Lankan business
environment and confidence levels significantly stabilizing and
improving almost all macro-economic fundamentals.
Achieving a low level of inflation, thereby significantly reducing
the pressure on cost of inputs, establishing lower rates of interest,
thereby substantially reducing the cost of borrowing, building up
foreign reserves to historically high levels, thereby enhancing investor
confidence in the Sri Lankan economy, ensuring stability in the Sri
Lanka rupee exchange rate, thereby enhancing predictability of the
domestic foreign exchange market.
Other measures proposed are establishing an enabling environment
where Sri Lankan businesses could access international capital and debt
markets for funding requirements at lower costs, achieving political
stability in the country, further improving confidence and reducing
policy uncertainties, obtaining the removal of Sri Lanka from the list
of countries described a 'high war risk' countries by underwriters and
improving internal work processes and systems of exporting entities,
thereby leading to substantial productivity enhancements.
The CBSL said it believes that the focused and long-term preparations
to face the emerging conditions, in addition to the firm level actions
taken towards diversifying markets, negotiating with buyers, enhancing
productivity, and reducing finance and input costs, has gradually offset
the possible decline in competitiveness arising from the withdrawal of
the GSP+ concessions.
Sri Lankan industries have proven their resilience amidst challenges
on earlier occasions.
The apparel sector, in particular, resisted strong competition from
low cost garment producers of other countries during the phasing out of
the Multi-Fiber Arrangement. At that time, not only did they adjust to
the new and challenging circumstances, but actually emerged stronger to
deal with the risk and expand their share in the world market. Sri
Lankan industries would overcome the non-GSP+ challenge, and emerge even
stronger, the Central Bank said. |